Symbotic Inc.

Good day and thank you for standing by. Welcome to Symbotic Third Quarter Financial Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message as light in your hand is raised. To withdraw your question, please press star 11 again. Please limit your questions to one question and one follow-up. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Charlie Anderson, Vice President of Investor Relations. Please go ahead.

Hello. Welcome to Symbiotics' third quarter of fiscal year 2026 financial results webcast. I'm Charlie Anderson, Symbiotics' Vice President of Investor Relations. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Form 10-K, including the risk factors. We undertake no obligation to update any forward-looking statements. In addition, during this call we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which is distributed and available to the public through our investor relations websites located at ir.symbotic.com. On today's call, we are joined by Rick Cohen, Symbotic's founder, chairman, and chief executive officer, and Izzy Martin, Symbotic's chief financial officer. These executives will discuss our third quarter of fiscal year 2026 results and our outlook, followed by Q&A. With that, I'll turn it over to Rick to begin.

Rick? Thank you, Charlie. Good afternoon and thank you for joining us to review our most recent results and business updates. We delivered strong third quarter results highlighted by continued revenue growth and expanding margins leading to continued gap profitability and adjusted EBITDA that more than doubled year over year. Thanks to another strong quarter, we remain well on track to achieve the objectives we laid out at the start of the year. As a reminder, Our first objective was to leverage our growing product portfolio and capabilities to broaden our opportunities with customers. We're clearly seeing this play out as our break-pack product to handle individual items or each's has now begun deployment at half of Walmart's regional distribution centers. In addition, we recently began installation of our first SIM microsystem for e-commerce fulfillment at the back of a Walmart store, a significant step forward towards unlocking this exciting new category of our business. We're also continuing to drive additional value for our customers that have existing operational systems by providing higher levels of performance through software to further optimize their supply chains. A recent example is using our software to more intelligently layer pallets and dynamically optimize freight delivery specifically for seasonal events like back to school. By doing so, we believe our customers can realize shorter delivery times and faster restocking during these critical periods. We believe customers are increasingly recognizing the impact our systems can have and as a result, we are seeing additional opportunities to broaden the scope of our work with both existing and prospective customers. For example, in the third quarter, we signed an agreement with Southern Glaciers Wine and Spirits for a second site after the success of their first facility. Southern Glaciers is a leading total beverage distributor serving 47 US markets in Canada. As we drive additional value to customers, it is allowing us to realize the second objective we laid out at the beginning of the year, which was to enhance our margins and profitability. Our forecast for the year implies full year adjusted EBITDA that is more than double that of last fiscal year. This continues to be a key focus area for us, and we see clear levers to continue enhancing our profitability, driven by value creation for our customers, and further operational efficiencies. The final objective we laid out was to continue to invest in our innovation engine to expand our capabilities and support future growth. The analogy I often use here is that our automation system is like an operating system and we add apps to enhance its functionality for customers. For us, this is playing out both organically and inorganically. Organically, we are making several functionality upgrades to our SIM bots to enhance the performance of our system. For example, we deployed over 1,000 larger bots into our operational system this calendar year to handle a wider variety of SKUs. With this new bot, we've also built new modularized software development tools to give us enhanced flexibility to create different bots for different tasks and payloads, with our SIM microbot being a perfect example. We're also in the process of rolling out LiDAR, enhanced camera systems, Nibolt advanced batteries, and other updates, all with the aim of driving enhanced efficiency and performance for our systems. Inorganically, we've made two tuck-in technology acquisitions that expand our capabilities. Fox Robotics for dock automation, and most recently, Arms Innovations for warehouse operations optimization. With Arms, we have an opportunity to expand the reach of our software beyond our automation system to the entire warehouse operation, optimizing the movement of both equipment and people. In summary, we are focused on meeting our objectives and in turn creating braggingly happy customers and expanding shareholder value. We also continue to have a solid balance sheet and backlog. As always, I want to thank our team for all their hard work, along with our customers and our investors for their continued support. I'll now turn it over to Izzy, who will discuss our financial results and output. Izzy?

Thanks, Rick. Fiscal third quarter revenue reached $721 million. near the high end of our forecasted range and was up 22% year over year and up 7% quarter over quarter. We also improved GAAP profitability with $55 million in net income. Adjusted EBITDA of $95 million was above our forecasted range due to expanding margins and operational efficiency. Our revenue growth was driven by the continued expansion in the number of systems in deployment and the growth of operational systems that generate recurring revenue. We started 11 new system deployments in the third quarter, including the new Southern Glacier site highlighted by Rick, bringing us to a total of 77 systems in deployment at the end of the quarter. This expansion in the number of deployments drove systems revenue growth of 20% year over year and 6% sequentially to 671 million. We also had four systems go operational during the quarter, bringing us to a total of 56 operational systems. As our base of operational systems continues to expand, software revenue grew 57% year-over-year to $13 million, and operations services revenue of $37 million grew 49% year-over-year, both in the fiscal third quarter. Turning to margins in the fiscal third quarter, gross margin expanded both sequentially and year over year due to strong project execution, cost discipline, benefits from scale, and revenue mix. Operating expenses on a GAAP basis were $128 million in the fiscal third quarter. Combined adjusted R&D and SG&A expenses totaled $85 million, with SG&A down sequentially due to operational efficiencies. Net income for the fiscal third quarter was $55 million, an improvement from a net loss of $21 million in the third quarter of fiscal year 2025. This included an unrealized non-cash gain on the fair value of our strategic investments of $19 million in the quarter, which was primarily driven by an increase in the value of our investment in NIABL and our next generation battery supplier. GAAP net income improved both year over year and sequentially, reflecting this impact as well as expanding margins and operating leverage. As Rick highlighted, adjusted EBITDA of $95 million was more than double the $45 million in the third quarter of fiscal year 2025. Our backlog of $22.5 billion remained strong. The slight decrease from last quarter primarily reflects revenue recognized in the quarter offset by final pricing adjustments on projects started in the quarter and the addition of the new Southern Glacier site. We finished the quarter with cash equivalents of $1.7 billion down from $2 billion last quarter due primarily to timing of cash receipts related to project starts along with the timing of cash usage related to project activity. Now turning to the outlook. For the fourth quarter of fiscal 2026, we expect revenue between 760 million and 780 million and adjusted EBITDA between 100 million and 105 million. With that, we now welcome your questions. Operator, please begin the Q&A.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please remember to limit to one question and one follow-up question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Andy Kapowski of Citigroup. Your line is now open.

Close enough. How's everyone doing?

Great.

So, Rick, I know you said that you've now installed a semi-grilled prototype into a Walmart store, so maybe you can give more color into where you are in that development process. I think you said previously you could see conversion on the $5 billion in Walmart backlog before the end of the calendar year. Is that still the right time frame? And then as Sim Micro has evolved, how have you thought about the ultimate opportunity even beyond the initial $5 billion? I think, for instance, you've been working on solving perishables with a smaller system. So maybe just an update would be helpful.

Well, I think you've covered up the whole waterfront there. So Sim Micro, we are installing. It'll take, I don't know, about six months into our first Walmart the new version of our system into the first Walmart store. We're running 19 of the old versions, but we've been working with Walmart to develop this. And so that'll come to life about six months from now. That should trigger expanded. We expect that'll work very well. We have a second site that'll follow shortly after that. And then that should trigger a bunch more sites once Walmart actually sees the system working. Your second question on perishables, we have a lot of interest in perishables. It seems like something clicked in the rest of the world and so I think the realization that with the new structure that you can save so much money on the construction costs of these perishable buildings and they're so expensive to start with We've had a lot of interest, so we would expect within the next six months, I guess I would say, to begin building our first prototypes and testing stuff.

Very helpful. And Izzy, maybe just revenue is beginning to accelerate now in Q4, you know, as per your guidance. Given the new storage structure, it seems like it's allowing you to accelerate deployments openly to continue to see continued acceleration in FY27 and revenue. At least how do we think about that if you don't want to give specific guidance?

Yeah, I think as Rick said, you covered it in your question. Obviously, as we unveiled the next generation storage structure, we were expecting that inflection point.

I think we're just starting that out.

I think the sequential improvement, quarter over quarter, including our guide, is call it steady. I think, though, the real inflection point of the next generation storage structure will really happen in the second half of next year as we proceed with the installation of that.

Helpful. Thanks, guys.

Our next call comes from the line of Matt Somerville of D.A. Davidson. Your line is now open.

Thanks. A couple of questions. Can you maybe provide an update on where you are with customer acquisition for Exxon and maybe update where you're at with site launches? And then I'm also curious as to what initial inbound interest is with respect to that arms acquisition you referenced earlier.

So on Exxon, our Atlanta site has gone live. We are receiving product there. Customers asked not to be named yet, but that site is now live and receiving product. And then our Lathrop site, which the customer is CNS, that symbolic system is now complete. And so that site will go live. within the next 60 or 90 days, and that'll be a nice revenue-producing site, because right now we have the system in there, but we're not getting any revenue as the cases go through Symbotic. So we're feeling good about these sites are coming online. It's been a journey to get these sites filled up, but the reality is we had to get the buildings built and show people. And we have a lot of incoming We have five buildings. And so the fact that we have five buildings, we're able to talk to bigger customers as well as smallest customers. But it's a process. But the answer to your first question is we're alive in Atlanta and receiving product. And in Lathrop, California, we will start filling out about 100% of what we plan there within the next 60 to 90 days. And then on ARMS, ARMS where we're doing the integration of the ARMS software with the operating system from Symbotic. We have a site, our first site that we're doing the integration will be the testing and then we'll be able to show people how that will work. And we think that'll be a very nice revenue software revenue business for us because we think it creates great value in improving the efficiencies of the maintenance whole system and process. It's a follow-up.

Yeah, go ahead.

No, that'll actually be one of the best examples of integrating AI with a software system because that system will actually be able to tell an operator what's wrong, where the inventory is, which operator should go fix it. So that's gonna be a very sweet little business for us.

Appreciate that caller. I'm curious if Southern Glaciers is using that next gen storage structure and maybe remind us what the site opportunity may ultimately look like with that customer.

So it's Southern Glaciers specifically? Yes. Southern Glaciers is not. Their second site is not using the newest structure in part because the way that the liquor industry works, the cases are more standardized. And so I think the third and fourth sites probably will, but the second site was already started in design. And these are These are liquor-heavy bottles, and the case sizes are pretty standard. The new structure is beneficial to them, but in more varied box sizes, it's even more beneficial. But the real answer is they would have used it, but we already started with the old structure when we designed it, and it's just too far down the road.

And then for the potential there is, Rick mentioned in his prepared remarks, we're starting the second one. And as you know, they serve in 47 U.S. markets, including in Canada.

Got it. Thank you, guys.

Thank you. Our next call comes from the line of Joe Gradano of TD Cowen. Your line is now open.

Hey, guys. Thanks for taking my questions. Just a couple of clarifications. The Atlanta site for XO, is that like a one-customer site? I know you mentioned the customer doesn't want to be named. Is that customer planning on taking the whole thing?

No, that's a multi-customer site. We're just receiving the first customer, and we haven't determined how much space they're going to need, but they're building up pretty quickly. Okay, got it.

And then on the micro-fulfillment, I'm just curious, you said you're going to deliver, you're building it out six months and then you'll do a second. What's the mechanism in the contract? I thought the contract was kind of like once they accept it, it automatically triggers the $5 billion and the $400 store order. What is required to have that hit?

The way we've done things with with Walmart in partnership is we build a prototype. We build them so that they work, but we also know that we already can tell from the prototype. We're building it into a store. I'm not sure I'm supposed to announce the store, but it'll become obvious pretty soon. But we'll build it into the store, and then we overbuild it to make sure that it works. and then we redesign it to make sure that we've got the cost out. In this case, make it smaller, make it more efficient. Walmart may add items, they may delete items. And when we do the second version, that's usually what triggers, okay, we want 400 of these.

Got it, okay.

The most important thing with these sites is there's the coordination of the hardware, but most of the time, What's happened with these micro fulfillment sites is that the software hasn't been flexible enough and the software and the automation haven't been coordinated enough. So we're going to overbuild this, but we probably won't build 400 of the version we're building now. But I think the one after this, we will.

Great. Izzy, just how should we think about the pacing of system ads maybe for next quarter and into the near future?

Yeah, so as you noticed, we had a great three quarters in a row. I had originally mentioned a couple of quarters ago, maybe the fourth would be a little light, but actually now as I'm seeing the trajectory, I think the fourth quarter will be in line with the third, maybe just a little short of the third. So great, great expectations where we've been in the last three quarters and where we're going to land for the year.

Great. Thanks, guys.

Thank you. Our next question comes from the line of Ken Newman of QBank Capital Markets. Your line is now open.

Hey, good evening, guys. Maybe for my first question, you know, Izzy, maybe you can help us just think about, I'll ask the new storage system or the revenue question on systems a little bit differently. as you think about the new storage system now being fully implemented, how should we think about the cadence of segment gross margins on that improvement, just given that you do expect that the maybe ramp sounds like maybe later in the back half of next year, but trying to think about the opportunity for gross margin improvement there and the cadence of that in coming quarters.

Okay, so let me unpack your question a little bit. First with, just let me repeat what Rick was saying on the micro-fulfillment. Starting now, the first prototype, we expect to get into after that, or maybe in the middle of that, getting the second prototype. I really am not expecting just yet the micro fulfillment, call it the store order, that is mentioned in the contract, probably until early 2028. So then when you think about margins, right, our whole journey of improving margins, right, this contract is more and many more. The one thing I will say about margins, we had a great quarter from a margin perspective. As I said last quarter, I was expecting stable margins. The quarter was really, really strong. I think the fourth quarter will behave very similar to our exit trend in the second. So I hope that helps, Carol.

Third.

Third.

Yeah, that's very helpful. I appreciate that. Maybe for the follow-on here, Rick, it was interesting to see a couple of bolt-on deals this quarter. You did a bolt-on last quarter as well. As you look at the forward innovation pipeline, is there any color you can give on just other types of deals that you're looking to maybe help you drive faster deployments? And I'd also be curious just if there's anything that you can kind of talk about on what you're spending on AI development in terms of token spend versus the hardware spend on R&D.

Yeah, so we are looking at more Voltons. It's an interesting time. As you guys know, there's so much money chasing AI that a lot of the traditional automation companies are running into funding problems. And so we've become a very good place for people to approach us as investors or and many other acquirers. So that's why we built up our balance sheet. We guessed right about that. We are right about that. I think we'll see continued opportunities there to acquire hardware. In the case of arms, it was a software. And some companies we're looking at are a combination of interesting technology, both hardware and software in vision.

The question you asked about AI is,

So the way I would describe it is I think we were doing AI five years ago before anybody called it AI. So we've been doing self-driving cars. We've been doing vision. We've been doing LIDAR. We generate, I think it's a trillion bits of data every day at every site. Maybe it's 100 billion. It's an incredible amount of data at every site. and so we're looking to economically store it in the cloud and then we are writing our own AI agents. So yes, we're using some AI to audit code and that's helpful but mostly what we will do is we will develop our own AI agents that will actually be able to predict and tell us what's going to go wrong with our systems before they go wrong and then actually communicate to the robots, drive them out of the system, tell the maintenance people what's wrong with them and fix them. So that's not something that we're going to pay a lot of money for outside. That's something that we've been building here for a long time. And that's why I think most people consider us one of the leading companies in the world with physical AI. And I think there's a lot of and Ms. Nomers about that, but we're actually doing it and we've been doing it for a long time before we used to call it machine learning. They used to call it a whole bunch of other things, but now we're actually learning how to use AI not just to generate reports, but actually to communicate directly with our robots and in some cases fix them, in some cases tell them what to do, in some cases tell them where to go to the exit ramp and get

are all fixed. If I could just clarify that last point, Rick. When you talk about scaling that infrastructure on the AI software side, does that require an incremental or scale-up in tokens needed to operate that system, or is that really just on the inference that you get to scale?

Yeah, so that's a great question. We're using some tokens. but there's a lot of open source AI. There's a lot of AI that, and we're also looking at different forms of AI. There's some AI that we can actually not have to go to the cloud. We can actually imbue that technology right into our bots because with the new Nvidia chips, we have four times as much storage and we'll have more storage on our bots that we didn't have two years ago. I don't think tokens, I don't think AI expense is going to be a major issue for us, and we're very focused on doing as much as we can internally ourselves. One of the things that we've learned is that about 80% of the AI that maybe we looked at using last year was a lot of formatting issues. It was not actually using the data that we needed. So one of the things we're focused on is because we generate so much data, because we've always mined our own data, we're actually looking at what's the most efficient way to use our data that's cost effective.

Thank you. Appreciate it.

Our next question comes from the line of Mark Delaney of Goldman Sachs. Your line is now open.

Good afternoon. Thank you very much for taking the questions. I think that our margins was one of the key highlights from the quarter. I believe there was 11 million about the midpoint of your guidance, but you talked even 12 million better. So, can you share more on what led to the decreed margin improvement and the upside relative to your expectations?

Sure. I'll take that. So, just to unpack the margins, right, if you think about it just The amount of revenue we had in the systems, those margins came in quite solid. Quarter over quarter, they actually came a little bit better than I was expecting originally. But those really come down to the project execution and the mix of business we had in the quarter. I think the other thing that came in nicely this quarter was the fact that App Services continues to deliver profitability. Maybe it was a little bit better than I expected, but at the end of the day, I expect next quarter to be in line with this quarter's revenue. And then last but not least, as you hit about on EBITDA margin, the operating leverage was really good because when you look at the non-GAAP FX year over year, it was only up 3%. So a combination of all those things, be it systems, operation services, and really the scale that we're getting in our affects really allowed us to deliver a more profitable order.

Very helpful. My other question was on cash flow. You talked about timing as the reason that the free cash flow was headwind in the quarter. Help us understand how to think about free cash flow for the upcoming quarter, so some of those timing issues persist, or maybe the better a good job will drive improved cash flow. Thanks.

Yeah, I would certainly look at the free cash flow for the quarter just as a timing item and not even timing that I have to wait for the whole fourth quarter. Those were really payments that just came in a week later. So I would say if I had a week more in the quarter, you wouldn't see no blip in that. I think the better way to think about it is to your question on fourth quarter, I would expect a positive free cash flow. And I think just in general, given our business, It's better to measure us over a longer period of time and that the free cash flow will be on an annual basis will be positive.

Our next question comes from the line of . Your line is now open.

Hey, afternoon, guys. Thanks for the question. Now that you've owned Fox Robotics for a little bit, curious if there's any updates to their product that you've made or are contemplating that improves the integration with your system. And I think you've also mentioned some of their largest customers are not Symbotic customers, so any updates on discussions with any of their customers and whether they could be potential customers?

Yeah, we've been very encouraged. All of the Fox customers are actually delighted that we bought the company. We're in talks with all of them. We've hired some new folks there. We've hired some new salespeople there. We're sitting down and doing a complete review with two of the larger customers. and just talking about what they would like for next versions, what they would like for next steps and so I think that's going to be a very nice business. We've been very encouraged. We've had no headwinds. We're actually, I think the customers we're talking to are saying we're really excited you own this company and in some cases they might want a symbiotic system and in some cases they're actually really interested in the combination of Fox, the ARM software, some of the other software we're looking at, and actually helping them with a dock management system. So we just started. It's a very small company, but I think it's got a very big potential. And we've been excited about the reception that we've got from all of the Fox customers.

Thanks. And for my follow-up, Izzy, you've been on a nice sequential EBITDA margin progression for the better part of two years. You did mention the fourth quarter guide kind of implies flattish EBITDA margin sequentially despite higher revenue. Could you just unpack maybe why margins wouldn't continue to improve with operating leverage?

I think right now I just want to make sure that we see it coming. So right now, based on our latest forecast, We do expect OpEx to just increase slightly, and that would be more on the SG&A side. So, you know, maybe it comes in better, but right now my expectation is that the OpEx would be just a slight uptick. I think the other part, as I mentioned earlier, the gross margins where we landed on the non-GAAP basis of 25% this quarter, Right now I'm going back to what I said I was expecting stabilization at the end of the second quarter. So if they come in closer to in line with the second quarter, those are the two main reasons why you would see that EBITDA margin would be flat.

Thank you.

Thank you. Our next question comes from the line of Guy Hardwick of Barclays. Your line is now open.

Hi. Hi, guys. Just whether you could update us on the remaining performance obligations. I think the 10Q says $22.5 billion and 15% realized over the next 12 months. It doesn't look like the changes were as significant this quarter than the previous quarter, just whether there's anything or just regular kind of contract plus ups as you begin deployments, particularly I think there's another, I think you said 11 starts.

That's correct. So the 22.5 and the banding within the next 12 months of 15%, that's exactly what we put out there. I think it just has once again to do with the mix of deployments. So just before I even get into the deployments, the 22.5 coming off at 22.7, we had a healthy amount of revenue in the quarter. You decrease it. As you know, we have pricing adjustments when we redo the backlog, plus the fact that we added southern glaciers. But it really then comes down when you're tracking it. It just really comes down to the 11 deployments we are putting in in the quarter, just what those pricing adjustments were. So it could be lumpy at any given time. I think the more promising thing is that despite the revenue that we're generating every single quarter, our backlog still remains very, very stable. And as we said before, that backlog still doesn't include the contract for the 400 back of store systems.

And Izzy, it looks like revenue deployments have been falling now for at least four quarters. Is that kind of a mix effect? What is the kind of Seems a little odd that system sizes in the Walmart business is actually going up, right?

Agreed, but it also just has to deal with, you know, at what point in the cycle we are in the installation phase, right? Because the revenue is going to come in as we get closer to month 13 forward. So there is a little bit of lumpiness, but I think it's better instead of just focusing on one given quarter, if you look at the multiple of the quarters and where we are, and what the expectation is going forward given that the fit banding is at 15% for the next 12 months.

So does that mean that you'd expect revenue for deployment to start going up again or will it continue to trend down?

I think we don't guide to backlog. I think the expectation for the next quarter given the guide we gave That's really where our expectation, but of course, we're always looking to not only have stable backlog, but to increase our backlog.

Well, revenue's going up. We expect revenue to go up.

Yeah, and we do expect revenue to go up, of course.

That's where the 15% comes in.

Thank you. Our next question comes from the line of Colin Rush of Oppenheimer and Company. Your line is now open.

Thanks so much, guys. Now with the ARMS platform purchased, can you talk a little bit about the opportunity to start introducing new offerings with some automation or robots that are more interactive with humans and existing assets that might be a little bit lower barrier to entry for some of the customers that you might want to grow with?

I'm not sure I understand your question.

I'm just looking for a sense of opportunities that you guys could bring to market that would be a little bit lower price for customers, a little bit lower barrier to entry to get them started as they move towards fully automated systems.

Yes. So I think the ARM software is something that we could sell to a customer The company actually doesn't make anything except software. So we could sell that to customers and introduce our software. The other thing is that the Fox robots, these are $100,000 machines. And so I think that is the way I look at it is we will become Our hardware will continue to grow. Our sales are going to continue to grow. But we will become much more of a software-centric company that's selling machines that basically perform for what we want our software to do. So, for instance, some of the Fox customers, there's a company, no secret, it's DHL, one of the largest 3PLs in the world. They really like the Fox robots. They want us to help them manage the dock. They may never buy a symbiotic system, but if you sell, I don't know, you sell 20,000 of these $100,000 machines, that's a pretty good sale. So they're not saying we sell that to DHL, but it's a huge market out there and it's a much easier point of entry. Your question is appropriate because the last two weeks we've had two major potential customers, retailers who are interested in automation, great companies, well-known names, and they're really looking at how they can enter into the automation space without a lot of experience. And so we can sell them a very small system. We can sell them a small system and a dock system. So that's one of our focuses is to get Some of these very large customers in with an entry-level product. So it could be a single one-in and a one-out sell. That could be in the tens of millions, low tens of millions number. And so, yes, that's what we're looking at.

And not to mention that the back-of-store system.

The back-of-the-store system is another opportunity.

Perfect. And then, you know, there's certainly been a lot of investment around perception technology and notably, you know, one of the LiDAR vendors is now selling LiDAR with color capability and functional safety. I'm just curious about how much leverage you might get from those sorts of perceptions solutions into simplifying bot design and optimizing performance, you know, and how we should think about the adoption cycle and some of those newer perception technologies going forward.

Yeah. So, So there's a number of people, some of us, that are doing LIDAR, slow moving bots to interact with people. I won't mention names of companies, but you know who they are. What we're doing is bots with LIDAR that are fast moving and weigh a lot. The change in technology and the reason we will expect to have LIDAR on all our bots within the next, I don't know, two years on the outside is that these LIDAR used to cost, four years ago they were $5,000, now they're under $500. And so they become very affordable for our bots and then it really enables our software. So where other people are using LIDAR, for basic like Akiva bot or something that moves slow, follows a line, meant to be used with humans. What we're really doing is putting LiDAR on bots. It's like a self-driving vehicle that wants to go fast. And so we're really trying to have bots that are now combined with ARMS and AI. really getting much closer to within our structure, a lights out facility that really we may go long periods of time before humans actually have to go in and interact with a bot. That kind of technology does not exist out there for warehouse automation. And that's our goal.

Perfect, thanks guys.

Thank you. Our next question comes from the line of Derek Sodenberg of Cantor Fitzgerald. Your line is now open.

Yeah. Hey, everyone. Thanks for taking my questions. I'm wondering, Rick, if you can expand on the ARMS acquisition a bit. You talked about a little bit in the prepared remarks and during the Q&A. I was wondering how you'll monetize that. Is that going to be a subscription or bundled through? kind of the systems price. And is this more for Exxon or is the plan to deploy this, you know, your large existing customers as well?

No, we will deploy this as an option for all of the Symbotic customers, including Exxon. So it'll be a software add-on.

Got it. And Rick, could you just talk about where This acquisition kind of started. Was this something customers were asking about? And then just high level is curious if you think eventually a large retailer might, you know, in a sense, cede control of the distribution facilities to Symbotic or Excel as you sort of really fully automate the supply chain here. If maybe it makes more sense for you guys to take on the facilities and, you know, they would just pay you per case or any of those types of conversations happening. Thanks.

Yes, so EXAL is definitely getting those inquiries and we've been funneling them through EXAL. We also have a number of sites, a number of customers where we sold them a system and then Symotic runs the system at a cost per case. So, and ARMS just means that if we were to do that with this kind of maintenance that we would charge the customer and our operating costs would be lower. and so we would be the beneficiary both of the software and of the more efficiencies. What ARMS does is it creates a database combined with the operating system which is inherent in every symbiotic system but it says to somebody that, so these, everybody, all the maintenance people, people in the front of the structure or working there have a handheld device. And it would say, lift 606 and geolocate it in this particular part of the building. And remember, some of these buildings are a million square feet. This lift has a failed valve. I need you to go there. Here's a picture of what it should take to fix it. I've already checked before you go. This is what AI does. I've already checked. These two parts are in inventory. So don't go to the lift and then go to the inventory Go to the inventory room, get these two parts, go to the lift. The whole thing should take you 40 minutes. We've been struggling with how do we make these maintenance systems more efficient. And we could sell this kind of system along with some of the symbiotic software to a lot of people in the world. This is the ultimate warehouse management maintenance system. Got it. Thank you.

Yeah.

Thank you. Our next question comes from the line of Greg Palm of Craig Helm. Your line is now open.

Yeah, thanks. I wanted to go back to the OPEX and maybe honing a little bit more on R&D. I mean, in light of a lot of these kind of newer technologies, and opportunities, yeah, perishables and micro-fulfillment. It was maybe a little bit odd to see R&D come down quite as much. It doesn't sound like that might go up. I think, as you said, maybe more stable. So I guess, is that just, are we really peering things back or is that more kind of a reallocation of expenses? Just wanted to get a little bit more color there.

Yes. Hi, Craig. Let me step back. First and foremost, R&D expense quarter over quarter was flat. All the things that Rick mentioned are the things that we're going to get started on. So hence, when I said earlier, I expect overall OpEx to go up. My expectation is that between R&D and SG&A, we do expect a little bit of an uptick. But as always, we want to maintain the ultimate flexibility in being able to increase our R&D. and that's where I make that comment of that's when EBITDA margins staying flat quarter over quarter is really to give us that flexibility there. So I wouldn't say R&D has come down. It has stayed flat. We've gotten, you know, call it to a rhythm on the things we're investigating but I expect a little bit of an uptick not only in the fourth quarter but in the quarters to come.

Okay, that makes sense. And I guess maybe just Shifting topics entirely, just in light of the other news, Steve's joining the board of directors. I'm just curious, maybe you can give us some thoughts on, you know, given his background, kind of what he brings to the table and how he might sort of help you scale to the next level.

Yeah, so I met Steve through one of my other board members. They were on a board together, spent a bunch of time with Steve. We're Steve, with his background, I think will be very, very helpful in helping us look at strategically M&A. We plan to be acquisitive. We built a balance sheet to be acquisitive. And so that's what we're working on. And so Steve is a perfect board member for that.

Yep. Okay. Makes sense. Thanks.

and his background when he was at Bain was in the tech sector.

Thank you. Our next question comes from the line of Michael Whitmore of Northland Capital Markets. Your line is now open.

Great, yeah, two questions. On the ARMS acquisition, how might you price that? You know, like a warehouse, how much might you charge for that or whatever much you use there? And then also, in the third quarter, how much revenue came from just developing the revenue around micro-fulfillment?

Okay. I'll take the ARMS. I mean, the ARMS will be a classic value pricing. If we can save somebody, a million dollars in warehouse maintenance. We're going to charge them a portion of that.

Yeah, on the micro fulfillment side, the amount of revenue recorded in the quarter is in the high single digit range, which is really kind of the average that I would expect going out.

OK, thank you.

Our next question comes from the line of Joe Bordano of TD Cowlitz. The line is now open.

Hey, thanks for letting me have the follow up here. Just quick, Rick, on on Excel. I'm just curious what the final like design looks like for this customer. Like, what did you guys what did they decide decide to do in terms of like trucks and who's responsible for that and how things are getting to and from the site? I think that was kind of

up in the air potentially as a lot of different ways you can go and just curious like we know how the inside of the building looks but how is the whole operation being kind of like what's the flow sheet yeah so so you saw we made an announcement we partnered with Manhattan on the software piece because so many people in that we've talked to are already familiar with the Manhattan integration layer. We're also doing our own integration layer. But the inside of the building is pretty straightforward. We'll move pallets, we'll move cases, we'll do each picking. And we are both hired some of our own transportation people and also engaged with some potential transportation brokerage or transportation companies that actually can bring customers into us. So we will manage freight when the customers want us to manage the freight. We will have that capability, both in and out of the building, but probably more so out of the building.

Thank you.

This concludes the question and answer session. I would now like to turn it back to Charlie Anderson for closing remarks.

Thanks, everybody, as always, for joining our call tonight. We really appreciate your interest in Symbotic and want everybody to have a good evening. Thanks so much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.